Sector Snap: Energy Firms Seen as M&A Targets

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"Deals of $8B$13B could transpire every quarter through year-end 2011."

Shares in energy companies involved in oil and natural gas services fell on Monday after an analyst said the sector is ripe for continuing consolidation.

Merger and acquisition (M&A) deals in the sector began to ramp-up in 2010 and surged the first three months of the year, says Citigroup Global Markets Analyst Robin Shoemaker.

Now, rising oil prices are setting the stage for more transactions, Shoemaker says in a research note on Monday, arguing that oil prices are the most reliable leading indicator of consolidation in the sector.

Nine transactions with a total value of $13 billion took place in the first quarter, including Ensco PLC's proposed acquisition of Pride International for $8.7 billion.

That's up from $7.3 billion in the fourth quarter and $3.4 billion in Q310.

Shoemaker estimates that $8$13 billion in deals could transpire each quarter for the rest of this year. The analyst anticipates more stock deals than cash deals.

Among the energy services companies Shoemaker sees as the most likely takeover targets this year are Weatherford International Ltd., Dresser-Rand Group Inc., FMC Technologies Inc., Superior Energy Services Inc., Helmerich & Payne Inc. and Rowan Cos. Inc.

Without a strong turnaround this year, Weatherford could opt to put itself up for sale and would be an attractive takeover candidate for multiple potential buyers, Shoemaker wrote.

Shares in Weatherford and the other energy companies slipped Monday amid an overall market decline following Standard & Poor's warning that it might lower its rating on U.S. government debt because of the mounting budget deficit.

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